Federal Home Loan Mortgage Corporation v. Navarro Cardenas et al
Filing
28
MEMORANDUM OPINION AND ORDER Adopt Report and Recommendation 23 Report and Recommendation.; denying as moot 6 Motion to Dismiss/General; denying as moot 6 Motion for Summary Judgment. This matter and all counterclaims are remanded to the State of Minnesota District Court, Second Judicial District, Ramsey County (Written Opinion). Signed by Judge John R. Tunheim on September 16, 2014. (DML)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
FEDERAL HOME LOAN MORTGAGE
CORPORATION,
Plaintiff,
v.
JESUS J. NAVARRO CARDENAS,
ALFREDO HERNANDEZ, JOHN DOE,
and MARY ROE,
Civil No. 13-2356 (JRT/JJK)
MEMORANDUM OPINION AND
ORDER ADOPTING REPORT AND
RECOMMENDATION OF
MAGISTRATE JUDGE
Defendants.
Kalli L. Ostlie and Wendy Oien Sanchez, SHAPIRO & ZIELKE, LLP,
12550 West Frontage Road, Suite 200, Burnsville, MN 55337, for plaintiff.
Jesus J. Navarro Cardenas, Alfredo Hernandez, John Doe, and Mary Roe,
Defendants.1
This case is one of a series of cases involving William B. Butler2 and arises from
an action brought by Plaintiff, Federal Home Loan Mortgage Corporation (“Freddie
1
Defendants were formerly represented by William, B. Butler, who was suspended from
the practice of law before the Eighth Circuit and the Court effective December 26, 2013. (Order,
Misc. Case No. 13-49, Jan. 14, 2014, Docket No. 10.) Consequently, the Court ordered
Defendants to either have new counsel enter an appearance on their behalf or file a statement
with the Court indicating an intent to proceed pro se by February 19, 2014. (Order, Jan. 29,
2014, Docket No. 26.) Defendants have not filed a response. However, because the objection
currently before the Court was filed before Butler was suspended, the Court will proceed to rule
on the objection.
2
See, e.g., Dunbar v. Wells Fargo Bank, N.A., 709 F.3d 1254 (8th Cir. 2013); Jerde v.
JPMorgan Chase Bank, N.A., 502 F. App’x 616 (8th Cir. 2013) (per curiam); Murphy v. Aurora
Loan Servs., LLC, 699 F.3d 1027 (8th Cir. 2012), cert. denied, 133 S. Ct. 2358 (2013); Torborg v.
Fed. Nat’l Mortg. Ass’n, Civ. No. 13-1211, 2014 WL 1303921 (D. Minn. Mar. 31, 2014);
Sigford v. U.S. Bank, N.A., Civ. No. 13–2225, 2014 WL 468300 (D. Minn. Feb. 6, 2014);
(Footnote continued on next page.)
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Mac”) against Defendants Jesus J. Navarro Cardenas, Alfredo Hernandez, and John and
Mary Roe (collectively, “Defendants”), seeking to evict Defendants from a property that
Defendants had mortgaged but which Freddie Mac claims it now owns as a result of
foreclosure. Defendants bring counterclaims challenging the eviction on the grounds that
the underlying foreclosure on the mortgaged property was invalid. Before the Court are
Defendants’ objections to the Report and Recommendation (“R&R”) of United States
Magistrate Judge Jeffrey J. Keyes, in which the Magistrate Judge recommended that the
Court abstain from exercising jurisdiction and remand the case to Minnesota state district
court. Because the issues involved can be fairly adjudicated at the state court level, the
Court will overrule Defendants’ objections, adopt the R&R, abstain from exercising
jurisdiction, and remand the case to state court.
BACKGROUND
Defendants Jesus J. Navarro Cardenas and Alfredo Hernandez acquired an interest
in the real property in question (“the Property”) via Warranty Deed dated April 11, 2005.
(Answer ¶ 15, Sept. 4, 2013, Docket No. 5.) That same day Defendants executed and
delivered a note (“Note”) and mortgage to JPMorgan Chase Bank, N.A. (“Chase”). (Id.
¶ 16.) Though not stated explicitly in the complaint, the circumstances described in the
complaint indicate that Defendants defaulted on the mortgage at some point before
January 2013. (See Notice of Removal, Ex. 1 (“Compl.”) ¶ 2, Aug. 28, 2013, Docket
____________________________________
(Footnote continued.)
Sonsalla v. Mortg. Elec. Registration Sys., Inc., Civ. No. 13–659, 2013 WL 4052825 (D. Minn.
Aug. 9, 2013).
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No. 1 (alleging that the mortgage was foreclosed).) The mortgage was foreclosed upon
and the premises were sold by the Sheriff of Ramsey County at public auction on
January 22, 2013. (Id.)
Following the foreclosure and sale of the Property, (Compl., Ex. A at 7)3 Plaintiff
filed an eviction action on August 21, 2013 in Minnesota state district court. (Compl. at
1).
Defendants removed to federal court on the basis that the Court has original
jurisdiction over the matter under 28 U.S.C. § 1345 because Plaintiff is a federal agency
under 12 U.S.C. §1452(f). (Notice of Removal at 2.) Once removed, Defendants filed an
answer and counterclaim, seeking to void Plaintiff’s claim to possession, void the
foreclosure, and void the assignment of the mortgage. (See Answer ¶¶ 36-49.)
Defendants’ counterclaims to the eviction and foreclosure center around the
validity of the assignment of the mortgage from Chase to Freddie Mac and Freddie Mac’s
subsequent foreclosure proceedings.
Defendants allege that the assignment of the
mortgage from Chase to Freddie Mac was invalid because Chase did not have the legal
authority to assign the mortgage.
(Answer ¶ 33.)
Moreover, they allege that the
foreclosure is void because the assignment of the mortgage from Chase to Freddie Mac
was not recorded. (Id. ¶ 35.) In response to the counterclaims, Plaintiff filed a Combined
Motion to Dismiss Defendants’ Counterclaim and Motion for Summary Judgment. (Mot.
to Dismiss Countercl. and Mot. for Summ. J., Sept. 20, 2013, Docket No. 6.)
The Magistrate Judge issued an R&R recommending that the Court abstain from
exercising jurisdiction and remand the action to Minnesota state district court. (R&R,
3
Unless otherwise noted, all page numbers refer to CMECF pagination.
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Dec. 12, 2013, Docket No. 23.) The Magistrate Judge observed that an eviction action is
fundamentally a matter of state law, and the exercise of federal review “‘would be
disruptive of state efforts to establish a coherent policy with respect to a matter of
substantial public concern.’” (Id. at 4, 6 (quoting Colo. River Water Conservation Dist.
v. United States, 424 U.S. 800, 814 (1976).) The Magistrate Judge also observed that
there is no substantial federal interest or right in the proceedings and that federal courts
are not as equipped as state courts to adjudicate dispossessory actions. (Id. at 6.)
Defendants object to the R&R’s recommendation that the Court abstain from
exercising jurisdiction over the action. They argue that, because the Court has original
jurisdiction over all civil actions in which Freddie Mac is a party under 12 U.S.C
§ 1452(f), the Court cannot abstain from “[c]ongressionally-mandated federal question
jurisdiction.” (Objection at 1-3, Dec. 15, 2013, Docket No. 24.) The Court, however,
concludes that abstention is appropriate in this situation, and will remand to Minnesota
state court over Defendants’ objection.
ANALYSIS
I.
STANDARD OF REVIEW
Upon the filing of a report and recommendation by a magistrate judge, a party
may “serve and file specific written objections to the proposed findings and
recommendations.” Fed. R. Civ. P. 72(b)(2); accord D. Minn. LR 72.2(b). “The district
judge must determine de novo any part of the magistrate judge’s disposition that has been
properly objected to.” Fed. R. Civ. P. 72(b)(3).
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II.
SUA SPONTE ABSTENTION
Federal courts are courts of limited jurisdiction. Thomas v. Basham, 931 F.2d 521,
522 (8th Cir. 1991). Therefore, the Court may raise sua sponte issues of subject matter
jurisdiction and abstention from exercising jurisdiction, “even if the parties concede the
issues.” Id. at 523; see also MCC Mortg. LP v. Office Depot, Inc., 685 F. Supp. 2d 939,
942 (D. Minn. 2010) (noting that the court raised the issue of abstention sua sponte in an
action involving an eviction proceeding removed to federal court). Federal courts may
decline to exercise jurisdiction in “exceptional circumstances.” Quackenbush v. Allstate
Ins. Co., 517 U.S. 706, 716 (1996) (internal quotations omitted). Abstention involves
weighing principles of federalism and comity against the federal interest in retaining
jurisdiction. See id. at 716, 728-29; see also id. at 733-34 (Scalia, J., concurring).
Furthermore, federal courts exercise discretion to “restrain their authority because of
scrupulous regard for the rightful independence of the state [courts].” Burford v. Sun Oil
Co., 319 U.S. 315, 332 (1943) (internal quotations omitted).
Under the Burford doctrine,
[w]here timely and adequate state-court review is available, a federal court
sitting in equity must decline to interfere with the proceedings or orders of
state administrative agencies: (1) when there are difficult questions of state
law bearing on policy problems of substantial public import whose
importance transcends the result in the case then at bar; or (2) where the
exercise of federal review of the question in a case and in similar cases
would be disruptive of state efforts to establish a coherent policy with
respect to a matter of substantial public concern.
New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 361
(1989) (internal quotations omitted).
Based on this doctrine, courts have “often
abstain[ed] from hearing eviction matters to avoid completely emasculating the state
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structure for dealing with such disputes.” MCC Mortg., 685 F. Supp. 2d at 946-47
(alteration and internal quotations omitted).
This is because “the landlord-tenant
relationship is fundamentally a matter of state law.” Id. at 946 (internal quotations
omitted). The court in MCC Mortgage referenced the procedures accompanying eviction
proceedings in Minnesota state court and determined that it could abstain from hearing an
eviction action on this basis. See id. at 947 (ultimately declining to abstain, in part
because the defendant had asserted significant counterclaims which could not be
considered in a summary eviction proceeding in state court and remanding would
therefore result in piecemeal litigation.)
The current action involves issues that are fundamentally state law issues and for
which there is an adequate and appropriate forum in the state court system. A postforeclosure eviction action is a summary proceeding created by Minnesota statute, see
Minn. Stat. §§ 504B.001 et seq., and enforced by Minnesota state law enforcement
personnel, see Minn. Stat. § 504B.001, subd. 4; § 504B.365. Unlike the action in MCC
Mortgage, the counterclaims brought by Defendants could fairly be decided in a state
court summary eviction proceeding.
See Fed. Nat’l Mortg. Ass’n v. Guevara, Civ.
No. 13-3603, 2014 WL 300985, at *2 n.1 (D. Minn. Jan. 27, 2014) (R&R observed that
MCC Mortgage “is factually-distinguishable from this action, which involves a postforeclosure eviction of a former mortgagor” in recommending that the court abstain and
remand). In fact, Defendants’ former counsel has previously filed claims similar to the
instant counterclaims in state court proceedings. See, e.g., Brinkman v. Bank of Am.,
N.A., 914 F. Supp. 2d 984, 989-90 & n.6 (D. Minn. 2012) (plaintiffs, represented by
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instant Defendants’ former counsel, brought claims challenging the validity of
foreclosure and defendants’ authority to foreclose and objected to federal court’s exercise
of subject matter jurisdiction over the claims and argued for remand to state court).
Moreover, several similar actions that have been remanded to state court in recent months
have had identical counterclaims. See, e.g., Fed. Nat’l Mortg. Ass’n v. Ly Long, Civ.
No. 13-3000, 2014 WL 1383949, at *1 (D. Minn. Apr. 9, 2014) (“The undersigned
ultimately agrees with the Magistrate Judge’s determination and finds that, despite
Defendants’ counterclaims, at its core, this case is an eviction action best handled by the
appropriate state district court.” (footnote omitted)); Fed. Nat’l Mortg. Ass’n v. GearFleury, Civ. No. 13-2389, 2014 WL 468202, at *2 (D. Minn. Feb. 6, 2014) (remanding to
state court after observing that “Defendants’ counterclaims arise from the same facts
underlying the eviction claim,” and that “[t]he parties may resolve the counterclaims as
part of the eviction action, or as a related state court action”).
Courts in this district have also repeatedly abstained from and remanded other
comparable actions in which the defendants made arguments similar to those Defendants
make here, that a federal court may never remand a case in which Congress has given it
original jurisdiction. This argument has been considered and rejected by this Court as it
will again be rejected here. See, e.g., Ly Long, 2014 WL 1383949 at *1 (concluding that
the court had subject matter jurisdiction but nevertheless concluding “that abstention and
remand are appropriate”); Fed. Home Loan Mortg. Corp. v. Fong Xiong, Civ. No. 131333, 2014 WL 1373577, at *1 (D. Minn. Apr. 8, 2014) (same); Gear-Fleury, 2014 WL
468202 at *1.
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The court concludes that this action, including Defendants’ counterclaims; can be
fairly adjudicated in state court and is therefore best resolved in a state court action. The
Court will therefore adopt the R&R, abstain from exercising jurisdiction, and remand the
action to state district court.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, the
Court OVERRULES Defendants’ objections [Docket No. 24] and ADOPTS the Report
and Recommendation of the Magistrate Judge dated December 12, 2013 [Docket No. 23].
Accordingly, IT IS HEREBY ORDERED that:
1.
This matter and all counterclaims are REMANDED to the State of
Minnesota District Court, Second Judicial District, Ramsey County.
2.
Plaintiff’s motion to dismiss Defendants’ counterclaims [Docket No. 6] is
DENIED as moot.
3.
The Clerk of the Court is DIRECTED to mail a copy of this Order to
Defendants at 1855 Kenwood Drive East, Maplewood, MN 551174 and to the Second
Judicial District of the State of Minnesota.
LET JUDGMENT BE ENTERED ACCORDINGLY.
DATED: September 16, 2014
at Minneapolis, Minnesota.
____s/
____
JOHN R. TUNHEIM
United States District Judge
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There is no address listed for Defendants on the docket, but the original complaint states
that the premises subject to the eviction proceeding are located at this address. (Compl. ¶ 1.)
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